Companies Help Municipalities Crack Down On Illegal Short-Term Rentals

The proliferation of websites that enable homeowners to list their houses for rent for short stays has made it difficult for East End towns and villages to enforce laws that prohibit frequent short-term rentals.

But municipalities can outsource the work to companies that will do the heavy lifting for them.

To help municipalities preserve community character, collect revenue and crack down on violators, companies have sprung up that ensure homeowner compliance. East Hampton Village has been in talks with two such companies to identify homes that are being rented out in violation of village code.

“They scan the rental sites — you know, Airbnb, HomeAway, Vrbo — they scan all of them and determine what properties are being rented in the village, and what’s being advertised,” explained East Hampton Village Board member Arthur “Tiger” Graham.

One such company, Host Compliance, informed the Village Board in June that it found 132 short-term rental units in the village that were being advertised online, excluding duplicate listings for houses that are offered on more than one website. In August, the number rose to 203 unique rentals, Mr. Graham said.

Host Compliance also provided a count for all of East Hampton Town, including the village: “They found 3,569 rentals listings on 2,902 rental units.”

Each municipality on the South Fork has its own rules governing short-term rentals. Most prohibit rental periods of fewer than two weeks or limit the frequency of stays that are that short. In addition to constant turnover, there are other concerns that village and town authorities have as well, such as overcrowding and rowdiness by short-term renters.

“Airbnb is turning our residential neighborhoods into hotel districts,” Mr. Graham said. “I think you’ll find that over the course of the summer — there were maybe not so much this year as in past years — three or four couples will get together and rent a house, which is by definition a share house, which we don’t allow in the town or in the village.”

Host Compliance and another company the village explored contracting with, LodgingRevs, do more than just identify houses being offered for short-term rentals. They also manage rental permitting and tax and fee collection, collect evidence of code violations, send notices to violators, and provide complaint hotlines.

Erin Neer, the CEO and founder of LodgingREVS in Durango, Colorado, said in an interview last week that the company monitors more than 30 vacation rental websites, plus additional local sites that are specific to certain resort communities. The company serves communities in 15 states, though all of the work is done online or via phone, so LodgingREVS does not need employees on the ground in each municipality. Its first short-term rental audit was in 2011 for Telluride.

“I saw this need, and I saw that the town of Telluride was missing taxes,” Ms. Neer said.

Some clients have outright moratoriums on short-term rentals, some require affidavits from homeowners that they will adhere to minimum durations, and some restrict the number of guests, she said. LodgingRevs customizes its services to define compliance differently from one municipality to the next, based on each community’s needs.

LodgingRevs will monitor the dates that a house is offered, when it is booked and what reviewers have to say to determine whether the homeowner or property manager is complying with the local laws.

To do so efficiently, the company uses artificial intelligence, such as photo recognition software, to match listings to addresses. It also flags if a house is listed on multiple vacation websites — either innocently or in an attempt to skirt the law — to keep track of how often it is being rented out.

While a majority of LodgingRevs clients use the company for collecting tax revenue, there are communities like East Hampton Village whose primary concerns are community character and compliance, Ms. Neer said. She said when there are many short-term rentals in a community, “it doesn’t feel like a residential neighborhood anymore.”

The LodgingRevs complaint line allows neighbors to report trash being left out, noise, parties and parking problems. LodgingRevs employees then will reach out to the emergency contact for the property. Many towns have rules that the owner or property manager must answer a phone call within an hour, or even be within an hour’s drive, Ms. Neer noted.

If a village requires a safety inspection in order to get a rental permit, LodgingREVS will build that into a custom online application that homeowners use.

“We don’t dictate to you what our software can do,” Ms. Neer said. “We follow the community’s rules.”

When homeowners are found to be in violation, LodgingREVS generates cease-and-desist letters. Having these on record helps villages take the homeowners to court, Ms. Neer noted.

Because LodgingRevs puts the application, permitting and renewal process online, homeowners never have to visit village hall, she pointed out, and that meant that when government buildings were closed due to COVID-19, LodgingRevs’ service was never interrupted.

The service also provides a helpline to talk homeowners through the application process, so municipal employees do not get tied up training residents how to apply.

Host Compliance, which was bought less than a year ago by Denver-based Granicus, offers a similar service to municipalities.

Host Compliance CEO and founder Ulrik Binzer said Friday from his home in Utah that the company serves communities looking to collect taxes, those that just wish to limit short-term rentals and those that have an outright ban, such as Carmel-by-the-Sea, California. There, short-term rentals are prohibited in all circumstances — though that doesn’t stop some homeowners from trying.

Host Compliance’s biggest client is Los Angeles, the second-largest short-term rental market. There, Host Compliance can directly access Airbnb to remove listings that violate the law, Mr. Binzer said.

He said Host Compliance uses its technology to monitor more than 50 vacation rental websites every day and to automatically collect screenshots of listings — and those time-stamped screenshots become admissible evidence should a city take a homeowner to court.

The information that Host Compliance gleans from rental listings is then cross-referenced with other available data sources, such as property records, white pages, satellite imagery, real estate listings, and Google Street View, he explained. “We use algorithms to do this, so we can speed things up.”

After the artificial intelligence generates a shortlist, a team of about 300 analysts looks at the clues. Then the municipality is provided with the addresses of violators and at least two pieces of evidence to substantiate the findings. Mr. Binzer said this makes the lives of city officials easier because “now they actually have a case served up on a silver plate.”

If a homeowner was discovered offering an illegal rental on one website and simply moved to another, that will be documented as well.

Host Compliance will also generate letters to homeowners who are in violation, informing them that they have been selected for an audit per city rules, at which point they have to turn over rental activity records.

“They have to now provide that to the city under penalty of perjury, and if they do not provide full accurate and complete information, that would actually be a felony,” Mr. Binzer said. “Most people are pretty upright and truthful about this.”

No one from Host Compliance ever visits a rental property. “We’re very focused on privacy protection, so we don’t want to be wading through people‘s front yards taking photos or sending out drones to catch people,” Mr. Binzer said. “We don’t think that’s appropriate. But we do feel it’s fair game that if people have put information on the internet, that we can use that for compliance monitoring purposes.”

Host Compliance’s online application will also flag if an address is in the wrong zone to receive a short-term rental permit, and all other ordinances are built in as well.

“We make it easy for the village staff on the back end to manage these applications — the status, the follow-up and renewals,” he said.

Homeowners can also use the platform to schedule an in-person inspection by a village inspector, if that’s required.

Most communities have found that using software to automate the work saves time and resources rather than doing Airbnb detective work, Mr. Binzer said.

Mr. Graham said that he tried in May 2019 to identify short-term rentals in the village. “I came up with 35,” he recalled. “Obviously, I missed a lot.”

To hire an outside company to monitor listings would cost around $10,000 annually, “which is a lot less than another village employee,” Mr. Graham said. “Our code enforcement group is really pretty busy. If you have to hire another guy, it’s a lot more than $10,000.”

East Hampton Village is not moving immediately to enlist a company’s help. A new administration that is still getting acclimated took over in September, led by Mayor Jerry Larsen, and may or may not decide to take another approach.

“We need to get a firm grasp on this issue, because we don’t have one now,” Mr. Graham said.